Mohawk Home to Raise Prices 5% to 8%

Left with "absolutely no choice" in the face of skyrocketing petroleum and oil-based raw material costs, Mohawk Home has made a bold New Year's resolution to raise its prices by 5% to 8% on oil-related products.

The $624 million manufacturer of area/accent rugs and bath rugs, long the industry leader in both product categories, effective Feb. 1 will tack on these price increases — which will vary depending on specific products and retail programs — to products related to petroleum, including those that employ polypropylene/olefin, latex and nylon, among others, Mohawk Home president Bill Kilbride told HTT.

"I hope the retailer will accept them, and we're ready to work with them on a case-by-case basis to execute this," Kilbride said. "They have to understand the difficult position we're in."

Mohawk Home's decision comes on the heels of a difficult year when, in addition to the soaring cost of oil, the dollar tumbled, the housing market went soft and retail business skidded and slowed.

"We gave this long and careful thought," Kilbride said. "In 2007 we worked very hard to maintain our margin in every way possible: we negotiated on product, made modifications with buyers … and we finally got to the point where there wasn't much more we could do. So here we are, at the point where we have to do this in a broad way to recover what these costs are."

Kilbride explained that in 2007, Mohawk Home saw the cost of petrochemical-based fibers, like polypropylene, increase more than 50%, and the cost of other component raw materials like latex, used largely in machine-washable non-skid backing on bath rugs, increase approximately 30%.

"Mohawk buys a lot of these types of products, and we are pretty good buyers. We look for the best price always," he emphasized.

Aside from competitively shopping for these and other raw materials, Mohawk Home "worked very hard in 2007" to reduce its expenses via other means, such as: shedding its lagging auxiliary textiles businesses — throws, blankets and decorative pillows; consolidating production and distribution facilities; and investing in new technologies that produce goods more efficiently.

"And we're still investing in technology … to make sure we have something everyone can be proud of," he added. "We have always tried to focus on our margin and make sure we are delivering the kind of returns that make this business important."

Importing is another means that Mohawk Home is diversifying product offerings and shaving expenses. Kilbride would not say if the company plans to step up its importing activity, which centers primarily on natural fibers like cotton and the bath rug category. But he did say that Mohawk Home would continue in 2008 to pursue global avenues "where appropriate."

"Over the past seven to 10 years, or since I've been here, we have always offered import alternatives for things like unique fibers and constructions not made in U.S. and also to take advantage of lower prices through global sourcing," he said.

Mohawk Home is likely far from the only supplier that will establish higher price points in 2008, even if it is so far the most outspoken. Last August at the Las Vegas World Market, several major rug makers noted the faltering retail price structure on rugs and the need in the new year to hike up prices and get them back to tolerable standards that would permit industry players to not only survive but be "healthy," as Kilbride noted.

"Every business needs to be healthy," he said. "If it has the right to exist, it needs to be healthy."